Significant administrative burden from EC proposal on intermediaries and cross-border tax planning

Insurance Europe has warned that the additional reporting obligations in the European Commission’s (EC) proposal for intermediaries to report cross-border tax planning arrangements would cause a significant administrative burden. In it response to the EC proposal, Insurance Europe states that it generally supports the Commission’s efforts to fight tax evasion. The Commission proposal introduces new obligations for intermediaries to report cross-border tax planning arrangements, and is the latest effort to increase tax transparency by extending the Administrative Cooperation Directive. Article 8aaa(2) of the Commission’s proposal reads: “Each member state shall take the necessary measures to give intermediaries the right to a waiver from filing information on a reportable cross-border arrangement or series of such arrangements, where they are entitled to a legal professional privilege under the national law of that member state. In such circumstances, the obligation to file information on such an arrangement or series of arrangements shall be the responsibility of the taxpayer, and intermediaries shall inform taxpayers of this responsibility due to the privilege.” It goes on: “Intermediaries may only be entitled to a waiver under the first subparagraph to the extent that they operate within the limits of the relevant national laws that define their professions. Each member state shall take the necessary measures to ensure that, where there is no intermediary within the meaning of point 21 of Article 3, the obligation to file information on a reportable cross-border arrangement or series of such arrangements shall be the responsibility of the taxpayer. The taxpayer shall file information within five working days, beginning on the day after the reportable cross-border arrangement or series of arrangements or the first step in a series of such arrangements, has been implemented.” Insurance Europe, in its position paper, states that this provision could lead to a situation where it will fall primarily to taxpayers, and therefore companies, to report cross-border arrangements, particularly in jurisdictions that recognise a legal professional privilege to intermediaries. It says monitoring this new reporting obligation and filing these reports will consequently result in an additional administrative burden, which should not be underestimated. In addition, says the paper, “a new obligation to report tax planning arrangements would go beyond the usual taxpayer’s obligation, which is to be tax compliant”, adding: “A reporting period of five working days would not be appropriate, considering the information taxpayers and intermediaries have to report. In Insurance Europe’s view, it would be sufficient if taxpayers reported their arrangements when filing their tax declaration. After all, as Insurance Europe understands, it is not the intention of the legislator to allow for immediate action from tax authorities when an arrangement is reported, but rather to flag an arrangement for potential future consideration when a taxpayer files their annual tax return. In this case, a very tight reporting deadline seems even more unreasonable.” The paper also states that only potentially harmful cross-border arrangements should be reported: “With the Commission’s proposal, this would be difficult, as the proposal as it stands is too vague to focus specifically on such arrangements. A clearer definition of the arrangements to be reported would therefore make the reporting obligations more manageable.” Finally, Insurance Europe notes in its paper that there is no provision in the Commission’s proposal to oblige tax authorities to state whether a reported arrangement is considered harmful. “To strengthen transparency and to provide intermediaries and taxpayers with certainty concerning their projects, Insurance Europe believes that tax authorities should inform them of whether they consider a reported arrangement harmful,” it says.

Significant administrative burden from EC proposal on intermediaries and cross-border tax planning

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